Currency Update - Monday 21st October 2019
AUD
AUD closed last week strongly thanks to RBA Gov Lowe’s upbeat speech on Friday and improved general risk sentiment. Friday’s Chinese data was mixed, but AUD was able to grind higher across the board as the chances of a November RBA interest rate cut diminished, now less than 50%. Brexit headway also helped the AUD resurgence, contributing to a more risk inclined outlook and Saturday’s vote by the UK parliament against the deal (see below for more Brexit detail) has only marginally affected this renewed confidence. There’s no local economic data due today and in fact for the whole week, AUD will be beholden to the usual risk drivers (US/China trade and Brexit).
USD
AUD opens this morning at 0.6845, slightly off the 1-month highs from early Saturday morning. AUD has benefitted from a tempering in the Turkey/Syria conflict (which Trump has claimed credit for), as well as reduced expectations of a Melbourne Cup Day interest rate cut after last week’s improved employment data. A number of Fed speakers were on the wires over the weekend, George and Kaplan indicated that they were not currently in favour of rate cuts in the short term while Clarida said that the fed would act as appropriate to sustain the expansion. The comments did little to move currencies, however US stocks were heavy into the close. A quieter week ahead for data, nothing due tonight and the highlight due on Thursday with Core Durable Goods Orders. Progress in trade negotiations (a completion of phase 1) could be reached at some point this week as well. Resistance should sit just below the 0.6900 level which is where September’s rally fell over.
EUR
AUD opens slightly higher this morning against EUR, 0.6139 at time of writing. Little to report in the way of economic data, Brexit news being the main focus (see below for details). Thursday yields a raft of economic data from The Zone, Services and Manufacturing PMIs are due, along with Spanish Unemployment (currently at 14.0%!!) and the ECB is also in action with the monthly Monetary Policy Statement and Press Conference.
GBP
AUD just holds on to the 0.53 handle this morning after trading very tight ranges on Friday and into the week‘s close. To Brexit and Boris’ deal was narrowly defeated in the UK parliament, just 10 votes would have swung it the other way. Given the close call, there is talk of a second emergency vote for Monday (tonight) in a last ditch effort to get the deal approved. As a result of the vote, Boris was legally forced to request an extension from the EU which he obliged in the form of an unsigned letter, however he accompanied this with a second signed letter saying he doesn’t want an extension to the 31 Oct deadline and saying that an extension would the further damage the UK and its EU friends. The Irish PM and Theresa May both spoke passionately in favour of the deal, perhaps tonight will yield a different result, a move that would likely see GBP and EUR strengthen across the board.
NZD
AUD sitting at a familiar 1.0738 this morning after a lackluster close to the week. The NZD, like AUD, was able to capitalise on the improved risk sentiment against USD, reaching similar 1-month highs before running out of steam. Light impact Trade Balance figures on Wednesday is the only data expected from across the ditch this week.